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Tuesday, October 12, 2010

Repatriated profits can help economy but won't happen under current tax rates

Why is Microsoft issuing bonds to raise up to $6 billion when it already has a lot more than that in cash? To pay dividends to its shareholders. Huh?

Why can’t Microsoft pay dividends from its existing cash accounts? Because most of Microsoft’s cash is held overseas and derived from overseas profits. So?

Why don’t Microsoft transfer it to its U.S. bank accounts? Taxes! Oh.

That’s right! Microsoft would have to pay corporate taxes if Microsoft moves money from its overseas operations to the United States, even if Microsoft already paid taxes to the other countries. That means billions are sitting overseas helping the economies of other nations.

Moving overseas profits state side is called “repatriation”. In an economic assessment prepared by Dr. George Schink and Dr. Laura Tyson, taxes on repatriated profits are keeping an estimated $565 billion from coming to the U.S. from other nations. That’s almost as much as the $700 billion stimulus/bailout plan passed by congress and signed by President Obama in 2008

The FairTax does not tax repatriated profits. That means the U.S. could get a $565 billion stimulus by enacting the FairTax. Let’s make it happen.